Hacker News Reader

Comment by skywhopper | Hacker News Reader

> There are capable smartphones for much cheaper then an iPhone that could get the job done. That's what GP was likely getting at.

True enough. And yet, if you yourself are not actually poor, you may not realize the value that a marginal luxury like an iPhone or Air Jordans or a top brand purse (sorry, I don't know what the hot brand of purses is atm) can bring to someone in that situation. Spending a few hundred dollars will not get them a better place to live or a better job or out of debt, but it can get them something that helps them appear less poor to the people around them, who can't see their bank balance or their house, but they can see what phone they are carrying around.

View on HN

Poor people don't need to 'seem less poor'. They need to be less poor. And admitting you need to save is the first step to doing so. I wonder if this need to seem less poor so often is actually part of how some of them get poor; wasting money/effort trying to influence perception instead of spending it trying to change reality.

You're close, the poor in most cases have self-defeating money habits. Any time they get money, they spend it immediately on things that have a short term feel-good effect, because their life has so little of that otherwise. This might be junk food, cigarettes/booze/drugs, lottery tickets, restaurant meals, gadgets or other "bling" etc.

They rarely have a person in their life who models delayed gratification and saving behavior, let alone strategic investing, so they never see the benefit of doing that.

No.

The singular defining quality of the poor is that they lack capital.

This makes everything about being poor more expensive.

>They rarely have a person in their life who models delayed gratification and saving behavior, let alone strategic investing, so they never see the benefit of doing that.

I'm not really sure this is correct. If you have a source please do share it.

From what I've read, the reason they have difficulty saving isn't because they weren't taught to do so but because when you constantly have to no to things you want, you use up a lot of energy, or more specifically, glucose. This in turn makes you more impulsive and less rational.

For example see: https://www.psychologicalscience.org/media/releases/2010/wan...

That being the case, I don't really like the idea of labeling poor people as being poor because of their inability to save or their own foolishness. There have also been studies that show that living in poverty actually changes your brain and makes you less intelligent.

See: http://www.scientificamerican.com/article/poverty-disturbs-c...

It's a self perpetuating cycle as far as I can tell

They should read things like YNAB:

http://www.youneedabudget.com

It is amazing how much money one has when one exercises restraint when spending it.

Budgets rapidly break down when you're regularly faced with unforeseen but necessary expenses that blow your cash reserves out of the water.

A lot of the problems of poverty is that once you get below a certain level, even if you are the most thrifty person around, you lose predictability in ways that end up costing you a lot of extra money.

Suddenly your employer pays you a day late and your carefully arranged bill payment schedule goes out the window and you get charged extra fees, or your car that you depend on to keep your job breaks down and you're forced into ridiculously high interest credit.

The purpose of trying to budget is to stop living from paycheck to paycheck. There might be some people for which this will not work, but the ones leasing new cars every few years (or signing overpriced contracts because of the "free" phone every two years) are not among them. I am sure that many people in such circumstances could find little things that could be cut if they looked (e.g. Cable TV, the landline phone, etcetera). Such things add up.

I have been applying such things to my parents' budget. Just the other day I heard from my mother that she no longer worries when unexpected medical expenses come up because she has found that the savings that my suggestions made more than paid for it. She gets TV for free OTA, replaced her expensive landline with free VoIP through Google Voice using an Obihai ATA, has lower electrical consumption (from various things, but the simplest being putting a lid on the frying pan to reduce evaporative heat loss, which is an efficiency improvement that allows food to cook faster), has a promotional rate for the newspaper she insists on having, has cell phone service that has no monthly fee (through ring plus), obtains heating oil at COD pricing, etcetera. Such things add to a four figure amount each year.

People leasing cars are not who I am talking about - they are not poor. If you are poor you don't get approved for credit to lease cars. At least my definition of poor draws the line well below that point.

I know of poor people in India who lack the ability to get jobs due to disabilities. They either have never had a job to be able to have a pay check or had jobs before they became disabled and are unlikely to see a pay check ever again. I know of a few instances of abject poverty in India through a priest I know. In one instance, the sole provider of a household developed a medical condition that rendered him unemployable. In another instance, people at a shelter for the physically and mentally disabled lack things like wheel chairs and bedding, with some of them just lying on the floor.

In both cases, I know people are sending money to help them. That is especially true in the case of that household in a poor village where the father is a disabled craftsman while the mother is completely uneducated. Enabling the children to study will give them the opportunity to work for a better life, which is an opportunity that their parents will never have.

Anyone who has a paycheck has the opportunity to obtain financial advice from sites like YNAB. Not all such people live as they would like, but being able to imagine something better puts them in a whole different category than actual poor people. They are able to make financial decisions and save for the purpose of making their lives better in the future. The truly poor lack such luxury.

I wonder on what basis you claim "the poor in most cases have self-defeating money habits", because your description doesn't fit for any people I've know with little money.

Seeming less poor is what measurably increases your quality of life in almost every social dimension. Given that social capital is the only capital most poor people have, it counts for a lot.

(As a chap who grew up poor.)

If you asked them, they would say that they definitely need to seem less poor. It brings a measure of status, easing their way through daily social affairs.

> "it can get them something that helps them appear less poor to the people around them"

I think it works the opposite -- if I see someone who I think is maybe poor, and they whip out the latest and greatest iPhone or are wearing $200 shoes or overpriced brand-name sunglasses, now I know they're poor. Because it's an obvious status symbol that's not in line with the rest of their lifestyle. Other poor people aren't stupid; they see right through it as well.

Whereas if I see someone who looks poor and they whip out an old Moto X and are wearing shoes from Payless, I assume they're comfortable with whatever economic/social status they have and don't need to try to signal. I view them as immediately more trustworthy and am more willing to cut them a deal, because I assume they're capable of long-term planning rather than impulsive spending.

This might not be 100% accurate, but I find it's a generally effective rule of thumb, and I think a lot of people use it to evaluate.

The same case could be made for the poor buying golden jewelry. I don't find it very convincing.

The same case could not be made, because gold is much less effective at signaling wealth. Gold plated jewelry is visually identical but much cheaper, so there's a "market for lemons" situation where the signaling value of solid gold drops to that of gold plated items. You can even get gold plated tungsten for the rare cases where weight matters. Fake iPhones are much more obvious.

This is really insightful. If anyone's getting hung up on 'not spending that money on groceries' try swapping 'iPhone' for "Suit you could wear to an interview".

Now do you think it's a waste of money? The function is very similar: an item that visually identifies you as part of some socioeconomic group.

The suit will get you a better paying job. How many of those buying expensive shoes are using them in a way that they are expected to pay off like the suit does? I'm not saying it is impossible, only that it doesn't apply in most cases.

At the expense of being more in debt, or worse, skipping a rent payment or a grocery run.

Skipping a rent payment or a grocery run might very well have much less impact on their lives.

In reply to pc86, yes, exactly. Do you believe everyone should make purely rational financial decisions, or only the poorest people in our society?

It's funny how people generally only make these criticisms of "poor" peoples' purchases.

You never hear people criticizing some middle-class guy for spending $27,000 on a Honda Accord instead of paying for a year of his kid's college education.

You do hear that, if you listen to the right people.

Admittedly, I hear that criticism of middle-class purchases quite a bit, among friends and family.

But when it comes to criticism of strangers, I just never hear it directed at the middle-class stranger in his Honda Accord. It's always directed at the lower-economic-class stranger and his $100 sneakers.

It buys them signaling. Why is that a good thing?

Because signalling affects how people treat you in every aspect of your life; everything from customer service to job prospects to your love life.

And we should be providing welfare to help people get better custom service and improve their love life? When we are talking about providing for people's needs, this wasn't part of the agreement. If we want to expand welfare, let's be upfront about it and decide what we expect in return for that welfare.

Reply on news.ycombinator.com